Top implications for individuals – Autumn Budget 2025

After months of anticipation and speculation, Rachel Reeves has unveiled her second Budget. Whilst the Chancellor reaffirmed the commitment not to increase tax rates for working people, the measures announced will see tax increases on other sources of income, and higher-value residential properties being taxed more, and a new charge per mile on electric and hybrid cars.

From dividend, savings and rental income tax increases to a new council tax surcharge on properties over £2 million, and restrictions on National Insurance relief on pension contributions made via salary sacrifice relief, these reforms will affect individuals and businesses alike.

At the same time, the change to allow the £1 million business and agricultural property relief allowance to be transferred between spouses offers welcome flexibility for estate planning.

Below, we explore the key implications and what they mean for taxpayers.

Inheritance tax reliefs: Transferable £1 million allowance

The Autumn Budget confirmed that reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) will take effect from 6 April 2026, maintaining 100% relief on qualifying business and agricultural assets up to £1 million per person, with 50% relief on any excess. A key concession announced is that any unused portion of the £1 million allowance can now be transferred between spouses or civil partners, similar to the nil rate band and residence nil rate band rules, even if the first death occurs before April 2026. Read more about inheritance tax reliefs here.

Changes to income tax and ISAs

The Budget introduced targeted income tax increases on non-employment and self-employment related income streams, with dividend tax rates rising by 2% from April 2026 (but not for additional rate taxpayers), whilst savings and property income tax rates will increase by 2% from April 2027 for all. The £500 dividend allowance and £20,000 ISA limit remain, but a new £12,000 cap on cash ISAs for under-65s will apply from April 2027, with the aim being to promote investment in stocks and shares. Read more about income tax and ISAs here.

National insurance relief on pension contributions

From April 2029, salary sacrifice for pension contributions will be capped so that only the first £2,000 per year is exempt from national insurance contributions (NIC), with any excess attracting employer NIC at 15% and employee NIC at 8% (or 2% above the upper earnings limit). Income tax relief remains unchanged, and the change only affects salary sacrifice arrangements, not standard employer contributions. Read more about national insurance relief on pension contributions here.

International matters

Non-resident dividend tax credit

The government will abolish the dividend tax credit for non-UK residents, aligning their treatment with UK residents. In real terms this means that where non-UK resident individuals did not pay UK tax on basic rate dividends, this will no longer be the case. It may therefore create a UK tax liability where the income is not disregarded, which has not previously been the case. This will take effect from 6 April 2026.

Capital gains tax: Non-resident capital gains

Further adjustments will be made to the non-resident capital gains tax rules, closing loopholes for protected cell companies and clarifying legislation for investors. This is unlikely to affect most non-UK resident taxpayers holding UK residential property. The changes apply with immediate effect, with further administrative reforms from 6 April 2026.

Capping inheritance tax charges for excluded property trusts

The government will introduce a £5 million cap on relevant property trust charges for pre-30 October 2024 excluded property trusts (broadly offshore trusts created by non-UK domiciled individuals). This will apply to trust charges from 6 April 2025.

Conclusion

The ability to transfer the £1 million business and agricultural property relief is a welcome change after significant lobbying. This removes an anomaly that would have required asset transfers or complicated will drafting to secure the relief.

The changes to inheritance tax announced in last year’s Budget have not yet come into force, and there is a limited window of opportunity to implement planning ahead of those changes. For further details, please visit our inheritance tax hub.

The changes to the income tax rates on dividends, savings and rental income will mean it will be more important than ever to consider the ownership of income generating assets, to reduce income tax exposures.

If the Budget has raised any questions for you, or if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.